What is Finance? Types of Finance

The dictionary meaning of the term finance is “the management of large amounts of money, especially by governments or large companies”, or “provide funding for a person or enterprise”. However, finance is a term that has a broad range encompassing activities like banking, leverage or debt, credit, capital markets, and investments. Long story short, it is management of monetary assets and the process of acquiring needed funds. It also rightly includes the oversight, creation and study of the aspects that make up financial systems.

Since financial activities occur in various spheres and levels, it is broadly categorized into the following categories:

Personal Finance:

This category of finance revolves around an individual’s personal monetary assets, needs, and future plans. Every person saves for their retirement. This kind of financial planning involves analyzing the current financial position of a person to formulate strategies for future. It is person specific and depends on their goals, earnings, and requirements. It includes the purchasing of financial products such as credit cards, insurance, mortgages, and various types of investments.

Corporate Finance:

It refers to the financial activities related to running a corporation, usually with a division or department that is created specially for this purpose. An example would be a decision of a company whether to raise additional funds through a bond issue or stock offering. Startups receiving funds from investors or in contrast a company deciding which projects to finance in order to grow the company come under this category.

Public Finance:

It includes taxing, spending, budgeting, and debt-issuance policies that affect how a government pays for the services it provides to the public. This includes every action taken by the government takes in regards to monetary matters concerning the state. A government is expected to ensure adequate social programs for its taxpaying citizens and to maintain a stable economy so that people can save and their money will also will be safe.

With a strong economy, personal and economic financial strategies, all the spheres are bound to flourish with proper resource allocation along with having a secure tomorrow.

Also Read: All You Need to Know About Loans

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